In my last post, I shared tax savings tips for individuals. Today’s post is geared towards businesses. This article will help entrepreneurs get prepared to deal the mountains of receipts, gathering of forms and general anxiety that typically accompanies this required annual task.
Businesses have separate tax rules than individuals. Although the rules differ depending on the type of business entity you have, in general the following tips apply to most business structures:
1 The most important tax tip is to keep great records of your business finances. Notice the emphasis on the word “great.” Many writers use the term good, but in this case, “good” is just not “good” enough. You have to be meticulous in your record keeping to ensure that you don’t have a problem if you’re audited and can deal with being selected for one in a less stressful way. Great record keeping includes keeping receipts (or copies), detailing income and expenses in a clear, concise method, and keeping your business finances completely separate from your personal finances. Keeping great records will also help you track potential deductions and not forget anything when it’s time to file your return.
2 Businesses are also eligible to make charitable donations and write a portion of them off. (For exact rules contact your tax advisor) So, donate to the 501C-3 organization of your choice. Buy that table at the event that benefits your favorite charity. But, be sure to get and keep receipts of your donations.
3 Make purchases that qualify for special depreciation (Section 179) – Section 179 allows you to deduct the full cost of certain qualified property up to a limit. This is instead of having to depreciate the property over a certain number of years for non-qualified property. Briefly, the types of purchased business property that is covered by this Section include Machinery & Equipment, Off the Shelf Software, Qualified Real Property, & Qualified Leasehold Improvements. For specific limitations, see your tax advisor.
4 Defer Income if possible – In the same way that you can early pay expenses, business owners can choose to defer income until 2014 as another option. When possible delay sending your December invoices until late in the month, so payments are actually received in January. This will lower your cash basis (which is how taxes are computed) income for the 2013 year.
5 Finally, set goals and start planning for 2015. Schedule an appointment with your tax advisor NOW! Don’t wait until January when things are hectic for us. Sit down with your advisor soon to discuss potential tax savings strategies that you can implement on January 1! You’ll be thankful that you did, because if not, it’ll be at least May before you get one of those focused appointments and by then you’re behind the proverbial Eight-Ball!
So, there you have it. I’ve shared a few tips for both your personal and business tax returns. Remember, every situation is unique and these tips are general in nature and only meant to spark a conversation between you and your tax advisor.
And now for the fine print:
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.
Kemberli Stephenson is The Profit Sherpa & works with rapid growth women entrepreneurs, speakers, coaches, authors, small business owners, entertainers, etc. She helps those who are looking to impact their bottom line, increase profit margins and grow a successful business. Kemberli helps entrepreneurs rapidly increase profits by helping individuals and companies chart a course to the summit, discover their danger zones and blind spots, and develop and implement profit strategies that will grow as your organization grows. Follow @Profit_Sherpa on Instagram for daily tips and motivation for entrepreneurs.